Please enable JavaScript.
Coggle requires JavaScript to display documents.
Globalisation, currency, Strong - Coggle Diagram
Globalisation
Keywords
-
-
-
-
-
-
-
-
-
Deprecistion
A currency depreciates when its value falls. a depreciation is
good for exporters, bad for importers
import price rise, export price rise
Appreciation
A currency appreciates when its value rises. an
appreciations is good for importers, bad for exporters
import price fail, export price rise
-
Advantages
Allows businesses to start selling in new foreign markets, increasing sales and profits
Can open factories and production units in other countries, possibly at a cheaper rate (cheaper materials and labour can be available in other countries
Import products from other countries and sell it to customers in the domestic market - this could be more profitable and producing and selling the good themselves
-
-
Disadvantages
Increasing imports into country from foreign competitors- now that foreign firms can compete in other countries, it puts up much competition for domestic firms. If these domestic firms cannot compete with the foreign goods’ cheap prices and high quality, they may be forced to close down operations.
Increasing investment by multinationals in home country- this could further add to competition in the domestic market (although small local firms can become suppliers to the large multinational firms)
Employees may leave domestic firms if they don’t pay as well as the foreign multinationals in the country- businesses will have to increase pay and conditions to recruit and retain employees.
Multinational company
Advantages
-
Transfer of skills and expertise, helping to develop the quality of the host labour force
MNCs add to the host country GDP through their spending, for example with local suppliers and through capital investment
Competition from MNCs acts as an incentive to domestic firms in the host country to improve their competitiveness, perhaps by raising quality and/or efficiency
-
Profitable MNCs are a source of significant tax revenues for the host economy (for example on profits earned as well as payroll and sales-related taxes)
Drawbacks
-
MNCs may not feel that they need to meet the host country expectations for acting ethically and/or in a socially-responsible way
MNCs may be accused of imposing their culture on the host country, perhaps at the expense of the richness of local culture. Might MNCs reduce cultural diversity around the world as they continue to expand, particularly into less developed or developing countries?
Profits earned by MNCs may be remitted back to the MNC's base country rather than reinvested in the host economy.
MNCs may make use of transfer pricing and other tax avoidance measures to significant reduce the profits on which they pay tax to the government in the host country
Globalisation refers to the growing integration of the world's economies, leading to the creation of a single inter-connected global market
-
-
-